Mega deals comprised 93 percent of Q2 utility mergers and acquisitions
August, 11th 2014
In the second quarter of 2014, mergers and acquisitions (M&A) in the North American power and utilities industry increased significantly on a volume and value basis compared to the previous quarter and year-over-year, according to PwC U.S.
A combination of regulated and merchant transactions, as well as continued activity by YieldCos, pushed total deal value to the highest quarterly level since 2011, PwC research found.
There were 13 power and utilities transactions with announced deal values greater than $50 million in the second quarter of 2014, compared to seven during both the second quarter of 2013 and the first quarter of 2014. Six deals greater than $1 billion -- the highest number of mega deals in a quarter since the second quarter of 2006 -- contributed nearly 93 percent of the $34.9 billion total deal value for the quarter.
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"Companies in the power and utilities industry are strategically pursuing assets, including those in close proximity to their existing geographic markets and/or with similar business models, to drive scalable growth and achieve operational synergies," said Jeremy Fago, PwC's U.S. power & utilities deals leader. "Hybrid utilities have continued to evaluate their merchant portfolios and the potential for divesting certain merchant assets, while regulated utilities and YieldCos continue to present an attractive investment for their yields and stable cash flows. Together, these types of deals have built on the power and utilities deal momentum we saw in the second quarter, and going forward, we expect the M&A environment to continue to pick up through a combination of regulated, merchant and YieldCo driven transactions."
Strategic investors accounted for 93 percent of deal value greater than $50 million announced during the second quarter of 2014 -- compared to 77 percent in the first quarter.
"Strategic investors are proactively managing their businesses to find new opportunities for growth and solidify their long term strategy in a dynamically changing industry," said Fago. "Well-positioned companies are deploying capital to acquire quality assets that can expand their geographic footprint. They are also looking inward and are making strategic investments to upgrade and secure aging infrastructure, improve operational processes and engage with employees and customers."